Digital El Salvador

Nobody expected such a scenario. In 2021, the small El Salvador became the first country whose official currency (next to the US dollar) was Bitcoin.

President Bukele decided to take this step, motivating him with savings, the possibility of creating new jobs, increasing investments and economic development.

In order to encourage its citizens to actively use the new currency, the government has introduced an app — the Chivo digital wallet to support it and pays every citizen 30 USD in Bitcoin. This is a considerable amount for a resident of El Salvador (the average wage is around $ 113). It was also decided to install new ATMs where you can buy Bitcoins or exchange them for dollars.

Rating agencies did not evaluate this positively from the beginning. The high instability of cryptocurrencies was pointed out, an imbalance in the financial stability of the country and consumer protection, and they warned against a repeated insolvency of El Salvador.

Likewise, the International Monetary Fund and the World Bank do not support these actions. There are pressures on their part that the government should stop this “experiment”. In El Salvador, the opposition has even filed a lawsuit in this regard and the inhabitants are skeptical.

This week, the Salvadoran government seized the market opportunity to buy 500 Bitcoins at an average rate of $ 30,744. They currently have 2,301 BTC, which in terms of current prices is estimated at USD 73.5 million. There are plans to issue Bitcoin-based bonds, thanks to which President Nayib Bukele wants to raise a billion dollars.

The Bitcoin dispute caused the International Monetary Fund to refuse to grant El Salvador a $ 1.3 billion loan since last year.

Nevertheless, Bitcoin is already legal tender and has supporters as well. Other countries are examining this idea to check whether the applied solutions will prove effective in practice and whether they will be able to adequately protect the interests of the state and citizens in a space that, as a rule, was to be decentralized and free from supervision.